BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 1650 (Jones-Sawyer) - Public Contracts: Hiring: Priority
Consideration
Amended: May 28, 2014 Policy Vote: GO 7-1 Judiciary
5-1
Urgency: No Mandate: No
Hearing Date: August 14, 2014
Consultant: Robert Ingenito
SUSPENSE FILE. AS AMENDED.
Bill Summary: AB 1650 would require people bidding on certain
state contracts to certify that they do not ask job applicants
to disclose information concerning their conviction history.
Fiscal Impact (as approved on August 14, 2014):
The bill would potentially dissuade noncompliant
contractors from bidding on certain state public works
contracts. To the extent this occurs, competition would be
reduced, resulting in potentially higher contract costs
than would have occurred otherwise. The amount of the
increase is unknown, but given the volume at state public
works contracts, could exceed $150,000 annually.
If a state contractor was later found to have been in
violation of the bill's requirements, there could be
additional costs to void the contract and rebid the
project.
Background: The State Contract Act regulates contracting
between state agencies and private contractors, and outlines
requirements for bidding and awarding of contracts for projects.
Current law defines projects to include the construction or
other improvement to a state structure, building, road or other
state improvement of any kind that will exceed a total cost of
$250,000 for the 2010 calendar year, as adjusted every two
years. The current threshold is $281,000
Current law prohibits employers from asking applicants for
employment to disclose information concerning convictions that
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have been sealed, expunged, or statutorily eradicated, and
certain marijuana-related convictions if the convictions are
more than two years old. Additionally, current law prohibits a
state or local agency from asking an applicant to disclose
information regarding a criminal conviction, except as
specified, until the agency has determined the applicant meets
the minimum employment qualifications, as stated in any notice
issued for the position
Proposed Law: This bill would do the following:
Require any person submitting a bid to the state on a
contract involving onsite construction-related services to
certify that the person does not ask an applicant for
onsite construction-related employment to disclose orally
or in writing information concerning the applicant's
conviction history.
Does not require this certification if the bidder or
state agency is otherwise required by state or federal law
to conduct a conviction history background check, or in any
contract position with a "criminal justice agency."
Does not require this certification when the person
submitting the bid obtains workers from a hiring hall
pursuant to a bona fide collective bargaining agreement.
Related Legislation: AB 218 (Dickinson), Chapter 699, Statutes
of 2013, prohibits state and local agencies from inquiring about
conviction history in their initial employment applications. AB
218 provides a similar exemption to this requirement regarding
applications for positions required by law to include a
conviction history background check and for positions in
criminal justice agencies.
In 2013, AB 970 (Jones-Sawyer) applied the same prohibition as
AB 1650, but to all state contracts. The bill was held under
submission by the Assembly Appropriations Committee.
Staff Comments: To the extent that private employers engage in
the practice this bill addresses, there could be a substantial
number of bidders whose bids would be excluded from
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consideration unless they change their hiring practices.
Generally speaking, a law that requires the state to exclude
certain firms' bids from consideration will tend to increase
costs by:
(1) Requiring the state to reject otherwise compliant low bids.
(2) Discouraging firms in the excluded group from bidding.
(3) Potentially increasing the cost of acquisition and/or
resulting in delays in acquiring needed products and services.
This occurs to the extent that additional staff time is expended
on inquiries, research, or analysis to determine whether a
bidder is in the excluded group, and/or investigations into
allegations against particular contractors.
Because the bill requires a firm to stop engaging in the
targeted practice for all construction projects, public and
private, before it submits its bid to the state, it invites
construction firms to weigh whether continuing to bid to the
state is worth changing hiring practices throughout the company.
Notably, the bill requires the company to make changes before
it submits its bid, and thus before it knows whether it will win
the contract.
Although the bill does not explicitly require the state to
investigate allegations that a bidder engages in the targeted
practice, in practice the state would likely be expected to do
so if presented with information that created a reasonable
suspicion that a bidder had given a false certification. This
could be challenging for the state agency contracting officer,
who is typically not trained or experience in conducting
investigations into private businesses' hiring practices. Such
an investigation could require the assistance of legal counsel,
internal audit staff, or investigative personnel.
If a current contractor were found to have falsely certified
that it did not engage in the targeted practice, the state
agency might conclude that the contract was void as a result of
having been awarded in violation of law. If so, project
completion would be delayed, and the state agency would incur
additional costs associated with rebidding the contract.
Depending on the circumstances, there could also be significant
costs associated with changing contractors.
DGS regularly awards contracts that would be subject to the
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provisions of this bill. Between calendar year 2003 and
calendar year 2013, DGS awarded 497 public works contracts over
$281,000 with a total value of more than $2 billion. In
calendar year 2013, DGS awarded 23 public works contracts over
$281,000 with a total value of $125.9 million. Other
departments that award large public works contracts include
Caltrans, Water Resources, and CDCR.
By discouraging some companies from bidding on public works
contracts, this bill may result in higher contract costs for
public works projects. These costs are difficult to estimate,
inasmuch as they depend heavily on the individual choices of
private contractors. To the extent that state agencies
investigate allegations that a contractor gave a false
certification and/or void contracts as a result of such
investigations, this would result in additional cost.
Author's amendment requires contractors to certify only if they
are awarded a contract.